The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

This one goes back, way back – all the way to December 18, 2008, when

Jamil A. Bouchareb, 27, Miami Beach, FL

Daniel A. Corbin, 32, of Miami Beach,FL

Frederick E. Bowers, 40, New York, NY, and

Eric A. Holzer, 34, of New York, NY

were arrested on federal criminal Complaints in the Southern District of New York charging them with conspiracy and securities fraud. Previously, on December 16, 2008, Matthew C. Devlin, 35, of New York, NY, had entered a guilty plea to an Information charging him with four counts of conspiracy to commit insider trading and one count of securities fraud. In total, this alleged conspiracy seems to have yielded nearly $5 million in profits to its participants.

NOTE: The charges contained in the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty

Devlin

According to allegations in the Information and statements made by Devlin pursuant to his plea, Devlin was an employee at Lehman Brothers, Inc. in New York City. At another company, Brunswick Group, LLC. (an international communications firm in New York), Devlin’s wife worked on mergers and acquisitions of publicly-traded companies and she obtained material non-public information ("inside information") about a number of mergers and acquisitions before they were publicly announced.

From approximately 2004 through August 2008, Devlin obtained inside information from his wife and, thereafter, shared different portions of it with different sets of individuals who traded on it. Not only did Devlin's tippees realize substantial trading profits from his tips but they also compensated him to the tune of thousands of dollars and other consideration.

Bouchareb and Corbin

As alleged in the criminal Complaint charging Defendants Bouchareb and Corbin, they were day traders who got their inside information from their broker (Devlin), who had obtained it from his wife. Neither Devlin nor his wife are referenced by name in this Complaint.

Bouchareb and Corbin knew the source of the information, and referred to Devlin's wife as “the Golden Goose.” It is alleged that from approximately February 2005 through August 2008, Bouchareb and Corbin realized hundreds of thousands of dollars in trading profits from inside information regarding mergers and acquisitions of the following 11 publicly-traded companies:

Eon Labs (Novartis);

Abgenix Inc. (Amgen);

Aztar Corporation (Ameristar);

Veritas DGC Inc. (CGG);

Mercantile Bankshares Corporation (PNC);

Alcan, Inc. (Alcoa);

Ventana Medical Systems, Inc.(Roche);

Pharmion Corporation (Celgene);

Take-Two Interactive Software Inc (Electronic Arts).;

Rohm and Haas (Dow Chemical); and

Anheuser-Busch (InBev).

Holzer

As alleged in the criminal Complaint in which Defendant Holzer was charged, he is described as an associate at a law firm in New York, NY, and he obtained inside information from Devlin, whose source was his wife. Again, neither Devlin or his wife are identified by name in this Complaint. It is alleged that from approximately March 2004 through December 2005, Holzer traded on inside information regarding mergers and acquisitions of

Invision Technologies, Inc. (General Electric),

Eon Labs, and

Abgenix,

Allegedly, Holzer realized $175,000 in trading profits, a portion of which he shared with Devlin.

Bowers

As alleged in the criminal Complaint in which Bowers was charged, he was Devlin's partner at Lehman. Again, neither Devlin nor his wife are referenced by name in this Complaint. Bowers is charged with providing some of the inside information to a client of his brokerage firm, and that this tippee profitably traded on those tips. From approximately December 2005 through December 2007, Bowers is charged with having illegally tipped about the acquisitions of Aztar and Mercantile Bankshares, and received a portion of his client's profits as compensation.

Bouchareb and Corbin were arrested in Florida and Bowers and Holzer were arrested in New York. Each has been released on bond.

Bouchareb and Corbin are each charged with one count of conspiracy to commit securities fraud and seven counts of securities fraud.

Bowers is charged with one count of conspiracy and two counts of securities fraud.

Holzer is charged with one count of conspiracy and three counts of securities fraud.

Conspiracy (each count): maximum sentence of 5 years in prison and a maximum fine of the greater of $250,000, or twice the gross gain or gross loss from the offense.

Securities Fraud (each count): maximum sentence of 20 years in prison and a maximum fine of $5 million.

Sentencings

In May 2009 and 2011, repectively, Bouchareb and Corbin pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. On December 9, 2011, Bouchareb and Corbin were sentenced, respectively, to 30 months and 6 months in prison. Each defendant was additionally sentenced to two years of supervised release and ordered to pay a $200 special assessment. Additionally, Bouchareb was ordered to forfeit $1.5 million and pay a $20,000 fine. Corbin was ordered to forfeit $1 million.

Devlin is awaiting sentencing in March 2012 on his guilty pleas to conspiracy and securities fraud charges.